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At Split Ends on Tax Increase
Residents Around $250,000 Mark Disagree on Fairness, Effect

By Donna St. George and Paul Schwartzman
Washington Post Staff Writers
Friday, February 27, 2009

In a posh salon in the heart of Potomac, JoAnn Pearlman was getting her hair colored, a skim latte in hand -- not the least bit ruffled by the budget proposal that President Obama unveiled, even though her pocketbook would clearly take a hit.

Her family income is more than $250,000, which puts her among those who would be most affected by the proposed tax law changes.

"I look at the big picture, and I think, 'This isn't an individual thing we're in right now,' " said Pearlman, 58, a registered independent, as she prepared for her youngest son's upcoming wedding. "This is a global and national situation. We are citizens, and we have to do what we have to do to get our economy on track again."

In a region with markedly high incomes -- and a high cost of living -- the Obama plan would affect the wealthy and those who think their lives have a lot more in common with the middle class.

Census figures provide no breakdown on families that make more than $250,000, but they do show that one in seven families in the Washington region earn more than $200,000 a year. In 35 locales, including the District, more than 10 percent bring in that much. The most affluent pockets are McLean and Potomac, where almost 45 percent of families hit that mark. About 12 percent of the District's families do.

Although sentiments such as Pearlman's stood out yesterday, the idea of paying taxes was not universally embraced. Some took a bit of offense at being thought of as so well-off that they could afford to pay more than they do now.

"I work six days a week," said Amanda Ta, 44, a hairstylist, who added that her combined family income could be high enough to hit the threshold. "I work 10 to 12 hours a day. What is the reward for someone like me to work harder?"

As analysts debated the losers and winners in the budget proposal, Ta and others weighed its personal effects -- or chose to see beyond them.

Edward James Leydan, a tax lawyer with an office on K Street, said he is unfazed by the tax increase, which he predicted could bring him additional clients even as it bleeds his bank account. A Democrat who voted for Obama, Leydan said the country's mounting economic challenges require sacrifices he is willing to make.

"What is it that Kennedy said, 'Ask not what your country can do for you'?" he said, standing outside his office building. "You know what? I'll bite the bullet.

"If it's a matter of growing a bigger pie," he said, "I'm willing to give up a bigger slice."

Said Shellie Steinberg, 69, a retired interior designer who lives in Potomac: "It's a plan. At least it's a plan." Steinberg said she has voted Republican and Democratic in the past. "Whether it'll work or not, I don't know."

Obama's proposal would create more of a burden for families making more than $250,000, reversing the tax cut enacted by President George W. Bush and increasing the capital gains tax from 15 to 20 percent. The proposal would cap the value of deductions for such items as charitable donations, mortgage interest and investment expenses at 28 percent for people in the top brackets, or 30 percent less than they would otherwise receive.

In the George Bacchus Salon and Spa in Potomac, the proposal drew mixed reviews.

Ta, the hairstylist, was adamantly opposed. The Laytonsville resident said she pays all of her bills, does not overspend and has never relied on the government. Her industriousness and sense of responsibility should not be penalized, she said. She works hard, she said, toward educating her children.

"It's the principle," she said. "I don't believe in giving money to people who can't afford to buy a house. Why should we pay for someone who is irresponsible?"

Businessman B.G. Raymond, who walked into the salon as Ta was mid-manicure, agreed.

"Socialism," said Raymond, co-owner of Potomac Pizza just across Falls Road. He added that he has passed the income threshold in previous years but not this one, with the economy tanking and business down. "I think this is terrible. It's socialism, not capitalism," he said.

Then there was Lana Orloff, 39, of Kensington, who owns a business and said she would come close to being affected by the proposed tax increase -- but not quite. If she does better in future years, she would be.

Still, she said, "I think it's fair. I don't think it's not fair. We have to do something."

George Bacchus, who co-owns the salon with his brother, said he believes that "people need to view what's best for the country. We're all one, one nation, one country."

His brother, Neil, who also works in real estate, said he would clearly be affected, adding, "I don't like it."

"I work real hard," he said. "I keep the door open for a lot of employees, and the thanks is, we pay more taxes." Still, he said, "it looks like everyone will have to contribute something."

But the economy may spare some people from higher taxes -- at least in the short term.

Chris Bogdan, 43, a developer who lives in Potomac, said the increase would have little immediate effect on him because "we're not making as much money anyway."

"It will have more ramifications in a couple of years when we make money again," he said.

Staff researcher Meg Smith contributed to this report.

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